Print version ISSN 0121-5051
PEREZ-FRUCTUOSO, María José and GARCIA PEREZ, Almudena. Analyzing solvency with extreme value theory: an application to the Spanish motor liability insurance market. Innovar [online]. 2010, vol.20, n.36, pp. 35-48. ISSN 0121-5051.
An accurate estimation of extreme claims is fundamental to assess solvency capital requirements (SCR) established by Solvency II. Basing on the Extreme Value Theory (EVT), this paper performs a parametric estimation to fit the motor liability insurance historical datasets of two significant and representative companies operating within the Spanish market to a Generalized Pareto Distribution. We illustrate how EVT improves classical adjustments, as it considers outliers apart from mass risks, what leads to optimize the pricing decision-making and fix a risk transfer position.
Keywords : Generalized Pareto Distribution; Tail estimation; Solvency II; excesses over high thresholds; Solvency capital requirements; XL Reinsurance; risk measures.